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Eurozone inflation was 2% in December, according to preliminary Eurostat data on Wednesday.
Economists polled by Reuters had expected inflation to fall to 2%, in line with the European Central Bank’s (ECB) target. The inflation rate in November was 2.1%.
Core inflation, which excludes the more volatile prices of energy, food, alcohol and tobacco, stood at 2.3% in the year to December, down from 2.4% in November, while services inflation slowed to an annual rate of 3.4% (3.5% in November).
The ECB kept its key deposit facility rate unchanged at 2% for the fourth consecutive time in December, with the last rate cut in June.
The adjustment coincided with eurozone inflation reaching 2% and was part of a rate-cutting cycle that lowered interest rates from a record high of 4% in 2024.
ECB Governing Council leaders told CNBC late last year that the easing cycle was at or near the end, but the central bank has repeatedly said it will take a data-driven approach to setting interest rates at each meeting.
of EUR and Stocks 600 Inflation was unchanged on Wednesday after the data was released, but the return of inflation to the ECB’s target could signal further rate cuts down the road.
“This move should please the stock market, as it gives the ECB another reason to cut rates in 2026. That said, inflation has been hovering around the 2% range for most of last year, so today’s move is modest but still positive,” Michael Field, chief equity strategist at Morningstar, said in an emailed comment Wednesday.
“Central bankers are walking a tightrope trying to stimulate the economy without causing inflation. But with inflation low and stable, sooner or later they should be able to take their foot off the brakes and lean toward more stimulus.”
